Rugby Union Salary Cap

As ever in the professional era the new Rugby Union season began with plenty of new ideas, sponsorships and rule changes but amongst the restructured season, the Super 12 inspired scoring system and the new title sponsors the effect and implications of the revised salary cap may be the most widely felt. With high profile casualties such as Richmond and London Scottish being victims of an over ambitious recruitment policy the administrators were duty bound to find a system which would protect clubs, amongst other things, from themselves. However, despite the good intentions the effect of the salary cap has not been widely welcomed and Dick Best, amongst others, has reportedly suggested that all is not fair with its implementation. Indeed, the essence of the problem as with many Rugby related initiatives is not so much the concept but the interpretation and as we have already seen the different interpretations of keeping within a £1.8m salary cap will undoubtedly cause more than a little concern during the course of the season.

Is the salary cap legal?

As long as all participating clubs continue to vote unanimously in favour of this type of regulation there is little prospect of the courts interfering. However, as has been seen, not all participating clubs are content with the interpretation of the regulations and therefore the prospects of interest from the courts is probably not as unlikely as one might initially assume. As discussed above, the main reason for the introduction of the salary cap is to provide a limit to the financial outlay required by the clubs but other reasons include the desire to maintain the competitive balance within the respective club competitions.

Rugby League, which has had a form of salary cap in place for some time, has also suffered difficulties. The League cap differs from the Union cap in that clubs are restricted to paying half of their income on players' wages, which may ultimately prevent clubs from overextending themselves, but has very little positive impact on the competitive balance. In addition the clubs are further restricted to paying only 20 player salaries of £20,000 or more per year.

Although both codes of rugby have introduced the cap to ensure that no club over extends itself in the pursuit of short term success it could be argued that rugby's administrators could leave themselves open to a charge of restraint of trade from a player unable to join a club because the salary cap of his chosen club has already been reached. It could also be argued that the competitive balance in the league is interfered with too greatly as (if one assumes that payment and performance is inextricably linked) the best teams are playing below their capability as a result of their reduced squad and their alternative personnel. Such an impact could be seen to be against the interests of the game, the supporters, the RFU and perhaps the European Commission. A further argument could be made that a salary cap hinders the free movement of players as an English salary cap leads to distortion in the market. For example, will top overseas players continue to flock to the UK if their wages will continue to be artificially constrained? Although many involved with the English national team will see this as a welcome effect of the salary cap it still remains contrary to European law.

Enforcement of the Salary Cap

As we have discussed, enforcement presents a formidable array of problems. Properly implemented salary caps must not be limited only to pecuniary payments but must extend to expenditure on players of virtually all kinds; their sign-on fees, houses, cars, pensions, disability and relocation allowances amongst other things. Not surprisingly, there is a plethora of different ways in which non-cash benefits can be paid indirectly, many of them arguably permissible. Clearly what rugby needs to avoid is to drive payments under the table, particularly if enforcement is not effective or consistent.

However, while undeclared payments will obviously fall foul of the administrators it is the grey area of "additional paid duties" which is likely to cause the most controversy. Many overseas stars are recruited not only to play but to coach as well while deals struck with local firms for part-time employment would allow the cost of a player to be spread. As long as the administrators are satisfied that a player is delivering some kind of service to his additional employer it is not easy to see how a club could be punished. Accordingly, those clubs with the best contacts and the most lucrative sponsorship deals are still likely to be able to afford the best players.

Sanctions

The premiership clubs have paid £75,000 for the so-called salary cap auditor to police the clubs compliance with the new regulations and the threat of expulsion from competitions should ensure that the clubs are not complacent in their contractual arrangements. It would, however, be an enormous surprise if any clubs were found to have exceeded the cap. While the sanctions are there as a deterrent, it is unlikely that any club would take their punishment meekly and given that a salary cap does not have the firmest foundation in law it would not be beyond the realms of possibility for a club to have any expulsion from a competition overturned on the basis that the salary cap was illegal in the first place.

Nevertheless, while the collective will remains it seems likely that the salary cap will be here to stay. Of paramount importance to both codes of rugby is financial stability and while the salary cap naturally has its critics, if it assists clubs with their financial stability and therefore strengthens the game of rugby as a whole then in the long run it will have served a very worthwhile purpose.